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Just as easily as money can be made, it can be lost if you don't
have the right plan. To help you overcome some of the obstacles
surrounding long-term investments, we've compiled a list of plans
that you should avoid at all costs.

Buy and hold…forever – Stocks move up and down
for many reasons. If the reason is because the underlying company
is weakening, it is time to get out. It is better to pull out and
re-invest the money in a good company than it is to sit
on the current (dangerous) investment and hope for a recovery.

“Has been” stocks – Another problem with
long-term investing is rooting for stocks that were once
successful. You wouldn't invest in a company that once had explosive growth from
sales of parachute pants, would you? There is no sense in buying
a once-successful company if its time has come and gone.

Airline stocks – Airline stocks fall in and out of favor at the drop
of a hat. Difficulty hedging fuel prices and production delays
from aircraft manufacturers can send airline stocks from hero to
zero. It's one thing to profit from a company that is having
near-term success; it's another to think the success will last
forever. Avoid airline stocks!

Selling on panics – Selling stocks into natural
disasters or other panic scenarios will almost never make you
money. If anything, buying appropriate companies at the right
time (such as Caterpillar, during the Japan disaster) can
position you in a great company at a great price. Selling on a
panic is the quintessential meaning of buying high and selling
low.

Putting all of your money in one company –
Diversification is the key to a successful portfolio. Even the
most successful companies always run the risk of failure, and it
makes no sense to put all of your money at the mercy of one
stock A typically well-balanced portfolio
consists of five key parts:

1. Cash – If all of your money is tied up at all times, you have
no way of taking advantage of buying opportunities on a down day
in the market.

2. Precious metals – Gold and Silver are terrific stores of
value, and do not lose their value as easily as fiat (paper)
currencies do. If you do not own the physical metals, the Gold
ETF and Silver ETF are good bets.

3. Dividend stocks – More than 40% of the returns on stocks come
from dividends. Many companies pay out portions of their
quarterly earnings in the form of dividends, some paying out
amounts north of 5% of their stock price. Why not take advantage
of companies that pay YOU to own their stock?

4. Growth stocks – Although growth stocks carry more risk and
volatility than defensive stocks, it can still be very profitable
to have some exposure to super-star technology stocks, or
up-and-coming pharmaceutical companies. As long as you believe
the growth stock(s) you own have sustainable growth, there is no
reason not to own them.

5. Defensive stocks – Defensive companies are generally those
that sell everyday goods and have little growth. Although
companies like Colgate-Palmolive (CL) and Coca-Cola can be
snoozers, these companies make their money regardless of the
economic environment, in addition to paying out reasonable
dividends. After all, people still brush their teeth and drink
soda in a recession.